EC expects Romanian financial system to drive 2009 annual budget deficit to 7.5% of GDP

European Commission expects a severe slowdown of the economic growth, down to 1.75% at a deepening budget deficit to record 7.5% of gross domestic product.

The economic meltdown that pushed several Member States into recession this year will jar even more the balance sheets, reads the forecast report of European Commission.

Thus, Romanian economy is expected to rise by 1.75% this year, against 7.8% in 2008, and 2.5% in 2010, when the European Commission sees a slight revival of the Member States’ economic status.

Last year, the public deficit was 5.2% of GDP, according to the preliminary data, in terms with ESA95 European principles, NewsIn informs.

Off-balancing the fiscal balance will drive the government to massive borrowings, lifting the public debt to 21.1% of GDP in 2006 and to 26.8% of GDP next year, versus 15.2% of GDP in 2008 and 127% in 2007.

Economic slowdown will occur with a falling internal demand that provided a solid ground for GDP growth in the recent years. Brussels’ projections indicate a 2.2% increase in internal demand in 2009, against 11.4% in 2008, and 15.7% in 2007.

The unemployment rate is also expected to climb to 7% this year, from 6.2% in 2008, according to data calculated based on International Bureau of Employment.

On Friday, minister of finances, Gheorghe Pogea said the number of unemployed persons would soar by 100,000 this year, up to roughly 505,000.

Moreover, the workforce expenses will fall by 0.3%, while the average growth of pay packages will lag to 9% this year and to 8.9% in 2010, from 22.5% in the past two years.

The crisis will also affect Romania foreign trade, according to EC’s estimates, the exports following to grow by merely 1.3% this year and imports by 1.7%. However this situation will drive current account deficit down to 11.9% of GDP in 2009, from 12.9% in 2008, and to 11.1% in 2010.

The inflation rate is expected to drop to 5.7% in 2009 and down to 4% in 2010, from 7.9% last year, according to EC report.

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